BHP to sink $US1bn into oil exploration

BHP Billiton
is set to double spending on oil and gas exploration this financial year, advising on Wednesday that spending in 2011-12 should reach $US1 billion excluding what is expected to be another chunk on onshore shale gas drilling in the US.

Investment on petroleum exploration last financial year reached just $US557 million, falling short of the once-flagged $US900 million because of permitting delays in the US Gulf of Mexico in the wake of the Deepwater Horizon drill-rig disaster last April.

BHP reported mixed results however from its September quarter exploration work, with positive news at the Mad Dog North-1 well in the Gulf, as reported in September, but a dry hole in Vietnam. Technical and other issues have affected the progress at other wells, with the Argus-2 well in the Browse Basin being temporarily abandoned, as is work at the Jurjur-1 well in Malaysia for equipment repairs.

BHP spent $US155 million in the quarter on petroleum exploration, of which $US64 million was expensed. It also reported a discovery at the Canteen North well in Trinidad, while other wells are still ongoing.

BHP earlier this year spent $US4.75 billion buying Chesapeake Energy’s Fayetteville shale gas business in the US, when petroleum boss
Mike Yeager
advised that ongoing investment in the assets would reach between $800 million and $US1 billion.

It followed that up with a much larger $US15.1 billion takeover of Petrohawk Energy, where capital expenditure is due to reach as much as $US5 billion a year by 2015.

BHP meanwhile recorded a 19 per cent increase in oil and gas production in the September quarter to 51.4 million barrels of oil equivalent. Gas output surged 68 per cent from a year earlier to 177.35 billion cubic feet, mostly thanks to the Petrohawk shale assets, while oil and liquids production slid 14 per cent to 21.8 million barrels.

An increase in oil output from the Shenzi field in the Gulf was partly offset by shutdowns and drilling deferrals in the US Gulf of Mexico. The Mad Dog field had no production in the quarter because of a shutdown for maintenance, but output is due to resume by the end of 2011, BHP said. The field had contributed more than 1 million barrels to BHP’s oil output in the September quarter last year.